BoJ hiked rates yet seems unconvincing

Peter Iosif, ACA, MBA IronFX

JPY weakens across the board

JPY weakened across the board yesterday, despite BoJ hiking rates as expected. The bank raised rates, yet the vote count revealed that two BoJ policymakers dissented and favouring keeping rates unchanged. The vote count tended to raise doubts about future rate hikes, as it underscored the bank’s difficulty in continuing to raise rates. The market had to reposition itself, selling JPY, as its hawkish expectations eased. Nevertheless, we still view the bank as maintaining a tightening bias. BoJ Governor Ueda in his press conference hit a more hawkish tone underscoring the bank’s commitment to price control at the bank’s 2% target.

US equities gain

US equities gained yesterday as the easing of oil prices was maintained, consequently easing also market worries for inflationary pressures in the US economy. On another front, AI related stocks were supported yesterday with NVIDIA climbing 2.5%, given also that Meta’s Zuckerberg, Nvidia’s Huang and Elon Musk pushed back against AI regulation. On the flip side, OpenAI disclosed six more reports of “unexpected or concerning” behaviour of AI models, allowing for the market’s worries to be maintained.

Oil prices correct lower

Oil prices dropped yesterday as market worries for the supply side of the international oil market tended to ease. Oil traders hope that the disruptions of Saudi oil supply will be limited, which allowed for some relief. Yet the situation is still very fragile and renewed tensions could push oil prices higher once again, while further easing of the market’s worries could weigh on oil prices.

Gold’s price edges higher

Gold’s price edged higher yesterday as the USD halted its upward trajectory in the FX market. On a fundamental level, easing worries for the path of oil prices and its subsequent effect on inflationary pressures allowed for gold’s price to edge higher. Should we see further USD weakness, we may see gold’s bulls pushing the precious metal’s price even higher and vice versa.

Other highlights for today

Today we get retail sales for August and the US industrial production for the same month, while Fed Vice Chair Bowman and Kansas Fed President Schmid speak . In Monday’s Asian session we get from China, PBoC’s interest rate decision.

Charts to keep an eye out

USD/JPY stabilised yesterday, yet renewed its upward movement in today’s Asian session. We adopt a bullish outlook for the pair and intend to keep it as long as the upward trendline we drew remains intact. Yet, the RSI indicator rose reaching 50, implying that the market seems to be indecisive about the pair’s direction. Should the bulls remain in charge over the pair, we may see USD/JPY breaking the 157.50 (R1) line and start aiming for the 160.50 (R2) resistance level. Should the bears regain control over the pair, we may see USD/JPY initially breaking the prementioned upward trendline in a first signal that the upward motion has been interrupted and continue lower to break the 155.00 (S1) line and start aiming for the 152.10 (S2) level.

Gold’s price edged higher yesterday after bouncing on the 4275 (S1) support line. In its upward motion, the precious metal’s price broke the downward trendline guiding it were, forcing us to switch our bearish outlook for gold’s price in favour of a sideways motion bias. Should the bears take over, we may see WTI’s price dropping below the 4275 (S1) support line, aiming for the 3960 (S2) support barrier. For a bullish outlook, we would require WTI’s price to break the 4550 (R1) resistance line clearly and start aiming for the 4890 (R2) resistance level.

USD/JPY daily chart

Support: 155.00 (S1), 152.10 (S2), 149.40 (S3).
Resistance: 157.50 (R1), 160.50 (R2), 162.80 (R3).

XAU/USD daily chart

Support: 4275 (S1), 3960 (S2), 3600 (S3).
Resistance: 4550 (R1), 4890 (R2), 5245 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

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